Bankruptcy Headlines

Navient, the nation’s largest student loan servicer, yesterday filed a motion for a partial summary judgment on two of the 11 counts the Consumer Financial Protection Bureau has brought against it, accusing the CFPB of failing to provide evidence of its claims, Politico reported. The CFPB filed suit in January 2017, alleging that Navient had “steered hundreds of thousands of federal student loan borrowers experiencing long-term financial hardship” into forbearance, which allows borrowers to temporarily stop making payments, while providing little or no information about alternative repayment plans, among other counts. The bureau identified 32 borrowers to support its claims, according to the filing, before withdrawing all but 15 of them. Of those, the 14 the company has already deposed “were informed about [income-driven repayment options] including prior to and immediately after forbearance,” Navient said. The company has now added some of the CFPB’s original witnesses to its own potential witness list. Navient has also accused the CFPB of stalling for time in the case; factual discovery was initially set to close in May 2018, but the consumer bureau has obtained three extensions, moving the deadline to June 2019.

The Consumer Financial Protection Bureau is changing course on its previous decision to stop supervising lending to active duty service members, HousingWire.com reported. Kathy Kraninger, the recently confirmed director of the bureau, sent a letter to Congress yesterday, asking for “clear authority” to supervise for compliance with the Military Lending Act. This turnaround comes several months after Mick Mulvaney, who served as acting director of the CFPB prior to Kraninger’s confirmation, decided that the bureau would stop supervising lending made to active duty service members. Much to the dismay of congressional Democrats, who pushed the CFPB to retain oversight. Under Mulvaney’s changes, the CFPB relied solely on complaints from service members and their families to trigger investigations. Mulvaney had reportedly expressed that the bureau had overstepped its authority by proactively looking into cases against military members without receiving complaints. Now, Kraninger has sent a proposal to clarify the CFPB’s authority to supervise compliance with the Military Lending Act to Vice President Mike Pence and Speaker of the House Nancy Pelosi. The proposal outlines a case for spelling out clearly what authority the CFPB would have over supervising military lending and proposes amending several sections of the Consumer Financial Protection Act of 2010 to outline that, according to the draft, “the Bureau shall have nonexclusive authority to require reports and conduct examinations” in regard to lending to military service members.

Westmoreland Coal Co. is seeking to break two union contracts and terminate retiree benefits totaling an estimated $329 million, saying dramatic cuts to its labor costs are needed in order to sell its coal mines to lenders and avoid liquidation, WSJ Pro Bankruptcy reported. The Englewood, Colo.-based company said in court papers filed on Wednesday in the U.S. Bankruptcy Court in Houston that it hasn’t received any qualified bids for mines it attempted to auction in chapter 11 other than an existing offer from senior lenders. Now, Westmoreland intends to move forward with that offer, a transaction that requires the company to scrap collective bargaining agreements and terminate retiree benefits. Read more.

In related news deals and activist campaigns at mining companies are picking up, but it may not be enough to rekindle investor enthusiasm for the group, the Wall Street Journal reported. The value of mining deals surpassed $10 billion in September for the first time in nearly four years, then topped that threshold again in November and earlier this month, Dealogic data show. Even so, the industry continues to be plagued by tepid metals prices, battles with emerging-market governments over reserves and dwindling supplies. For investors, growth potential just doesn’t stack up relative to other industries, said Lucas Pipes, a mining analyst at B. Riley. Read more. (Subscription required.)

Puerto Rico’s plan to slash its sales-tax-backed debt relies on a tax-free exchange of old bonds for new ones. But the partial U.S. government shutdown has thrown a wrinkle in the proceedings, bondholders said in court yesterday: the Internal Revenue Service hasn’t been able to vet it in advance because of the closure, Bloomberg News reported. That led Peter Hein, a bondholder fighting the debt-adjustment plan, to ask U.S. District Court Judge Laura Taylor Swain to reject it, saying that creditors need to know how the IRS will treat the exchange for tax purposes before it takes place. Hein also claimed that the proposal, which is designed to lower the islands’ crippling government debt, is unfair because it pays Puerto Rico residents more than mainland creditors.

BlueMountain Capital Management LLC, a hedge fund with a significant stake in PG&E Corp., has challenged the utility’s board over a plan to resort to bankruptcy to tackle wildfire damages that PG&E estimates could run as high as $30 billion, WSJ Pro Bankruptcy reported. The California utility announced on Monday that it would file for bankruptcy, jolting BlueMountain and other investors that bought up the stock in 2018 before the state’s deadly Camp Fire, which killed 86 people. The utility’s equipment is suspected of having triggered some wildfires. The announcement slammed the already depressed price of PG&E’s shares and bonds. The shares, which were selling for $48.80 just before the Camp Fire broke out in November, fell 9.5 percent to $6.36 yesterday, marking a three-month drop of 87 percent. BlueMountain, which reported owning 4.3 million shares as of Sept. 30, now owns about 11 million shares, according to a person familiar with the firm’s holdings. The hedge fund contends the utility’s board is moving too quickly toward a chapter 11 bankruptcy, destroying value unnecessarily.

Elizabeth Warren is demanding that Wells Fargo & Co. be kicked off college campuses, a market the bank has said is among its fastest-growing, Bloomberg News reported. Warren said yesterday that she requested more information from Wells Fargo Chief Executive Officer Tim Sloan and from 31 colleges where the bank does business. The inquiry follows a Consumer Financial Protection Bureau report said that Wells Fargo charged students the highest fees of 573 banks examined. “When granted the privilege of providing financial services to students through colleges, Wells Fargo used this access to charge struggling college students exorbitant fees,” Warren said in a statement. “These high fees, which are an outlier within the industry, demonstrate conclusively that Wells Fargo does not belong on college campuses.” Wells Fargo is “continually working to improve how we serve our customers,” a bank spokesman said in an emailed statement Thursday. “Before and since the CFPB’s review on this topic, we have been pursuing customer-friendly actions that support students,” including waiving service fees on some checking accounts offered to them.

The Tax Cuts and Jobs Act significantly changed many aspects of business taxation, especially for distressed companies. The way net operating losses work has fundamentally changed. The ability to deduct interest expense is now significantly limited and, as a result, distressed companies may have very different tax profiles than they previously have had. Changes to several rules impact the decision on whether to structure a reorganization as a tax-free transaction or a “Bruno’s” taxable transaction. The international tax regime has been fundamentally altered, both with respect to normal operations and with respect to long-standing issues regarding the appropriate scope of pledges and guarantees that can be provided in connection with DIP financing and cash collateral packages. All of these rules remain subject to an active and very much ongoing regulatory process that places a significant degree of uncertainty around tax outcomes. The panel will highlight and contextualize these key issues so that restructuring specialists can be aware of their potential impact

Tuesday, February 19

12 Noon - 1:15 pm ET

Registration: Free

CLE is available in qualifying states.*

SPEAKERS

Anthony Sexton
Kirkland

John Lehrer
BakerHostetler

Howard Steinberg
KPMG

*1 hour of general CLE credit is available in the following pre-approved 60-minute-hour and 50-minute-hour states: AK, AL, AR, CA, DE, GA, IL, MO, NJ, PA, SC, TN, TX, VT, WI, and WV. These states follow an approved jurisdiction policy: AZ, CO, CT, NH, NY. ABI will submit attendance to DE, IL, NV, PA, TN, and TX. For those jurisdictions not listed,ABI will not seek direct accreditation attorneys will need to self-submit. Some states allow may not allow self-submission. ABI will issue certificates for attorneys to self-submit for approval. ABI charges an administrative fee of $5 for Members and $25 for non-members upon requesting CLE credit for this program. Further details will be provided the day of the event.

Conference Address

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